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Ed's Critical Reads

Apr 15, 2014

Mortgage Lending Drops to 17-Year Low as Rates Curb Borrowing

U.S. mortgage lending is contracting to levels not seen since 1997 — the year Tiger Woods won his first of four Masters championships — as rising interest rates and home prices drive away borrowers.

Wells Fargo & Co. and JPMorgan Chase & Co., the two largest U.S. mortgage lenders, reported a first-quarter plunge in loan volumes that’s part of an industry-wide dropoff. Lenders made $226 billion of mortgages in the period, the smallest quarterly amount since 1997 and less than one-third of the 2006 average, according to the Mortgage Bankers Association in Washington.

Lending has been tumbling since mid-2013 when mortgage rates jumped about a percentage point after the Federal Reserve said it might taper stimulus spending. A surge in all-cash purchases to more than 40% has kept housing prices rising, squeezing more Americans out of the market. That will help push lending down further this year, according to the association.

This article showed up on the moneynews.com Internet site yesterday---and I thank West Virginia reader Elliot Simon for sending it along very late last night.

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Tensions over Money Flows Bode Poorly for Global Economy

For a bunch of people who just agreed the global economy is doing better, top officials from the world's rich and poor nations sound rather worried.

For poor nations, the easy monetary policies in advanced economies are leading to big swings in capital flows that could destabilize emerging markets. For rich countries, the hoarding of currency by developing nations is blocking progress toward a more stable global economy.

Those tensions, which have been brewing for years, seemed to be rising as finance ministers and central bank chiefs from the Group of 20 economies gathered last week in Washington, as evidenced by harsh words from Washington and Delhi.

Both rich and poor say they are acting in their own self interest, and what makes the conflict so intractable is that both have very rational arguments.

This Reuters piece, filed from Washington, was posted on their Internet site in the wee hours of Sunday morning EDT---and I thank reader "h c" for sharing it with us.

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Martin Hutchinson: The Ultimate in Foolish Leverage

The Financial Times revealed this week that trades in index credit default swap (CDS) options had managed to avoid being listed on exchanges, with all the transparency requirements that brings, instead being allowed to continue trading on an over-the-counter basis. The amount outstanding is relatively small in relation to the $25 trillion of CDS outstanding, but lack of transparency is likely to hide a deep underlying problem. I had thought that CDS themselves represented the ultimate in unmanageability by conventional risk management. But index CDS swaptions are worse, being even more leveraged and hence even more liable to excessively large tail risks that can crater the world's banking system.

Let's start with a little background, for those who never read our 2010 book, "Alchemists of Loss," or who have forgotten it. CDS were invented in the 1990s as a way to hedge/bet on credit risk. As an instrument, they have a number of problems, one of which (significant for these new gambling chips) being that there's really no good way to determine how much the thing will pay off in a bankruptcy. The CDS bankruptcy "auction" in which a few million dollars' worth of defaulted debt is put up for auction, to determine the price of instruments worth billions, is far too easily gameable. That's why, when swap market practitioners like myself had looked at the possibility of CDS in the 1980s, we had decided there was no practical way to create a sound product.

Well, dear reader, this short essay is a must read, but don't feel bad if you get a little lost as you progress through it.  If you don't completely understand why you should be terrified of credit default swaps and swaptions, just know that you should be. [That, and collateralized debt obligations [CDO], which he doesn't mention]  You'll be scared enough by the parts you do understand.  This commentary by Martin was posted on the Bear's Lair over at the prudentbear.com Internet site a week ago yesterday---and I thank reader U.D. for bringing it to our attention.

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Guardian and Washington Post Win Pulitzer Prize for NSA Revelations

The Guardian and The Washington Post have been awarded the highest accolade in US journalism, winning the Pulitzer prize for public service for their groundbreaking articles on the National Security Agency’s surveillance activities based on the leaks of Edward Snowden.

The award, announced in New York on Monday, comes 10 months after the Guardian published the first report based on the leaks from Snowden, revealing the agency’s bulk collection of U.S. citizens’ phone records.

In the series of articles that ensued, teams of journalists at The Guardian and The Washington Post published the most substantial disclosures of U.S. government secrets since the Pentagon Papers on the Vietnam war in 1971.

The Pulitzer committee praised The Guardian for its "revelation of widespread secret surveillance by the National Security Agency, helping through aggressive reporting to spark a debate about the relationship between the government and the public over issues of security and privacy".

This article showed up on The Guardian Web site early yesterday evening BST---and it's the first offering of the day from Roy Stephens.

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Europe's Top Banks Cut 80,000 More Staff in Post-Crisis Overhaul

Europe's largest banks cut their staff by another 3.5 percent last year and the prospect of a return to pre-crisis employment levels seems far off, despite the region's fledgling economic recovery.

Spurred into action by falling revenue, mounting losses and the need to convince regulators they are no longer "too big to fail", banks across the globe have shrunk radically since the 2008 collapse of U.S. bank Lehman Brothers sparked the financial crisis.

Last year, the tide of bad news began to turn for European banks, which are among the region's largest employers.

But despite the improved outlook, Europe's 30 largest banks by market value cut staff by 80,000 in 2013, calculations by Reuters based on their year-end statements showed.

This short Reuters essay, filed from London, was posted on their Web site on Sunday morning EDT---and it's the second offering of the day from reader "h c".

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Banking Union Dominates Final European Parliament Session This Week

Crucial laws for the EU's banking union will headline proceedings in Strasbourg this week as MEPs gather there for the parliament's final session before May's European elections.

On Tuesday (15 April) deputies will debate and then sign off on the three final pieces of banking legislation: pan-EU rules protecting the first €100,000 of individuals' savings; a directive on bank recovery which sets out the hierarchy of shareholders and bondholders who will suffer losses if private banks get into difficulties; and a law establishing a single resolution mechanism for banks.

The agreement establishes a single regime to wind-down banks alongside a common fund worth €55 billion paid by the banks themselves to cover the costs of resolution. The rules will apply to all banks in the eurozone, as well as to those in countries which sign up to them.

This story, filed from Brussels, was posted on the euobserver.com Internet site yesterday morning Europe time---and it's the second contribution of the day from Roy Stephens.  It's worth reading.

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Washington Drives the World to War — Paul Craig Roberts

The CIA director was sent to Kiev to launch a military suppression of the Russian separatists in the eastern and southern portions of Ukraine, former Russian territories for the most part that were foolishly attached to the Ukraine in the early years of Soviet rule. 

Washington’s plan to grab Ukraine overlooked that the Russian and Russian-speaking parts of Ukraine were not likely to go along with their insertion into the EU and NATO while submitting to the persecution of Russian speaking peoples.  Washington has lost Crimea, from which Washington intended to eject Russia from its Black Sea naval base. Instead of admitting that its plan for grabbing Ukraine has gone amiss, Washington is unable to admit a mistake and, therefore, is pushing the crisis to more dangerous levels.

If Ukraine dissolves into secession with the former Russian territories reverting to Russia, Washington will be embarrassed that the result of its coup in Kiev was to restore the Russian provinces of Ukraine to Russia.  To avoid this embarrassment, Washington is pushing the crisis toward war.

This essay by Paul was posted on his Web site yesterday---and is definitely worth reading, especially for all serious students of the New Great Game.  My thanks go out to Roy Stephens once again.

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Europe Has Subjected the Greek People to a Cruel Experiment

Greece’s triumphant sale of five-year bonds to hedge funds (1/3) and global in investors – half based in London – tells us a great deal about the mental and emotional state of investors.

It tells us very little about the state of the Greek economy or Greek society. It is certainly not evidence that Greece is safely out of the woods. It is even less a vindication of EU/IMF Troika policies, an epic failure that will be studied years hence by scholars.

Normally when a country emerges from the trauma of an IMF austerity regime it has at least a tolerable level of debt, and if need be a devalued currency to restore competitiveness. Tough reforms matched by condign relief. The country is put on a viable path towards recovery.

This has not happened in Greece. Public debt is still 178pc of GDP, despite a haircut of private creditors near 70pc in effective terms, and despite (or because of) serial EU-IMF loan packages – the “occupation loans” as they are known in Greece. This level remains untenable for a country without a sovereign central bank and currency.

This Ambrose Evans-Pritchard blog, which is worth reading as well, was posted on the telegraph.co.uk Internet site on Saturday---and once again I thank Roy Stephens for sending it our way.

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US Corn Exports to China Drop 85% After Ban on GMO Strains – Industry Report

China’s rejection of shipments of US corn containing traces of unapproved genetically modified maize has caused a significant drop in exports. According to a new report, US traders have lost $427 million in sales.

Overall, China has barred nearly 1.45 million tons of corn shipments since last year, the National Grain and Feed Association, an American industry association, said Friday.

The tally is based on data from export companies and is significantly higher than the previous numbers reported by the media, which said roughly 900,000 tons were affected. US corn exports to China since January are down 85 percent from the same period last year, the report says.

China has been blocking shipments of American corn from its market since November. This was caused by the presence of the MIR162 genetically modified corn strain in the shipments. It was developed by the company Syngenta and has not been approved by the Chinese government since an application was submitted in March 2010.

This article appeared on the Russia Today Web site during the Moscow lunch hour on Saturday---and I thank South African reader B.V. for finding it for us.

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Nine King World News Blogs/Audio Interviews

1. John Embry: "The End Game Will Be Disastrous For the U.S. and the West"  2. James Turk: "Comex Casino Lies---and Skyrocketing to New All-Time High"  3. Dr. Paul Craig Roberts: "Why This Collapse Will Be So Horrific"  4. Michael Pento: "The End Game For the United States Will Be Catastrophic"  5. John Ing: "China's Massive Gold Hoard---and Global Flight From the Dollar"  6. Robert Fitzwilson: "Alarming Secrets U.S. and Saudi Arabia Are Hiding From the World"  7. Richard Russell: "The Cheapest Thing on the Planet is Silver"  8.  The first audio interview is with Dr. Paul Craig Roberts---and the second audio interview is with Bill Fleckenstein

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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Goldman Stands by $1,050 Gold Target on Outlook for Recovery

Gold will resume a decline as U.S. economic growth accelerates, according to Goldman Sachs Group Inc., which reiterated a forecast for the metal to end the year at $1,050 an ounce.

Bullion’s rally this year was spurred by poor U.S. data probably linked to the weather and rising tension in Ukraine, analysts led by Jeffrey Currie wrote in a report, describing the reasons as transient. With the tapering of the Federal Reserve’s bond-buying program, U.S. economic releases will return as the driving force behind lower prices, he wrote.

Gold’s 12-year bull run ended in 2013 as the Fed prepared to reduce monthly bond-buying that fueled gains in asset prices while failing to stoke inflation. Prices rose 10 percent this year even as the Fed cut purchases, with Russia’s annexation of Crimea and mixed U.S. economic data boosting haven demand. Last year, Currie described gold as a “slam-dunk sell” for 2014.

Of course there's no way that gold will even get a sniff of that price, but the mainstream media will print any drivel without question that Wall Street hands them.  I found this Bloomberg story, which was filed from Singapore, posted on their Web site very early yesterday morning Denver time.  I borrowed it from the sharpspixley.com Internet site.

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Question Greenspan About Gold at the New Orleans Conference in October

The greatest failure of financial journalism and investment fund management long has been the failure to put specific questions to central banks about their surreptitious interventions in the markets, their market rigging. But participants at this October's New Orleans Investment Conference may have an opportunity to start correcting that failure.

Astounding as it seems, former Federal Reserve Chairman Alan Greenspan has agreed to speak at the conference and to take questions from the audience, including questions about gold.

Of course there is no guarantee that Greenspan will answer the questions, or answer them honestly, rather than claim some obligation to protect the secrecy of Federal Reserve operations or deflect questions to the U.S. Treasury Department, whose Exchange Stabilization Fund is explicitly authorized by federal law to trade secretly not only in gold but also in any foreign currencies and "other instruments of credit and securities"...

This commentary by GATA secretary/treasurer Chris Powell was posted on the the gata.org Internet site yesterday.

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Bart Chilton Joins America's Largest Law Firm as Policy Advisor

It seems like it was only yesterday (actually it was early November) when infamous CFTC commissioner, legendary threat to gold manipulators nowhere, and Alexander Godunov impersonator Bart Chilton made a very dramatic exit stage left.

Here is what we said at the time:  Having "left traders in their own" during the shutdown, Chilton expressed "excitement" at his new endeavours after sending his resignation letter to President Obama this morning (more poetry? - or body doubles?) "I'm reminded of the old Etta James song, 'At Last,'" said Mr. Chilton, one of the agency's three Democratic members. "At last, we've got this rule here," and at last, he would be leaving the CFTC. This leaves us wondering whether Chilton, no longer burdened by the shackles of his meagre compensation, perhaps can finally do what he has been promising to do for years - become a whistleblower - after all he has insinuated so many times he knows where all the "dirt" is; unless, of course, it was all for show.

The rhetorical answer to the rhetorical question: of course it was all for show, confirmed moments ago when Chilton became just the latest "regulator" to take the great revolving door out of a worthless public service Washington office into a just as worthless, but much better paying private-sector Washington office. Presenting the latest employee of DLA Piper, the largest law firm in the US, and possibly the world, by number of partners - Bart Chilton, poet.

This should come as no surprise to anyone, as it certainly didn't for me.  This news item showed up on the Zero Hedge Web site late yesterday evening EDT---and I thank Elliot Simon for sending it to me just after midnight.

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New York Fed Contradicts Its Former Vice President About Gold Accounts

The Federal Reserve Bank of New York has contradicted the assertion of its former vice president that it has provided gold accounts to bullion banks.

The assertion of such accounts was made by H. David Willey, the former New York Fed vice president in charge of foreign central bank accounts and the gold vault at the New York Fed, in a speech given in May 2004 to the American Institute for Economic Reserve in Great Barrington, Massachusetts.

Willey said: "The Federal Reserve Bank of New York provides limited facilities for gold transactions. The bank will allow gold accounts only for foreign monetary authorities and for banks that are members of the Federal Reserve System, not for other gold dealers in the U.S. markets."

I found this commentary by Chris Powell posted on the gata.org Web site yesterday.

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Anglo American "Mulls Sale of South African Platinum Mines"

Anglo American's chief executive has hinted that the mining titan is looking to offload its strike-hit South African platinum mines to concentrate on open-cast extraction.

The London-listed firm's operations in South Africa's platinum belt north of Johannesburg have been idle for close to three months, forcing the firm to dig into reserves and hitting its bottom line.

About 80,000 miners are on strike and have vowed not to return to the shafts until their minimum monthly wage is doubled to 12,500 rand, around $1,200.

Anglo American says that demand, if met, would wreck its platinum subsidiary.

This AFP story, was posted on the france24.com Internet site yesterday morning---and I thank reader B.V. for his final contribution to today's column.

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Gold scarce, India's Silver Jewellery Exports Double

A shortage of gold as a raw material and the consequent decline in gold jewellery exports appears to have opened up new avenues of growth for silver jewellery in India.

India's silver jewellery exports rose 45.33% to $84.1 million in February 2014, and jumped 89% in the 11-month period to $1.35 billion, according to data from the Gems and Jewellery Export Promotion Council.

Council data also showed that silver jewellery exports rose 109% between April 2013 and February 2014, to $1.3 billion (Rs 81.4 billion) from $642 million (Rs 38.85 billion) in the same period of the previous financial year.

Pankaj Parekh, vice chairman of the Council said it was not just silver jewellery that shone in the overseas market, but rather exports of silver utensils, artifacts and other silver articles too continued with their upward trend to the US, parts of Europe and Japan.

This silver-related news item, filed from Mumbai, showed up on the mineweb.com Internet site yesterday---and it's a must read of course.

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Economists Notwithstanding, Indians Know How to Put Their Gold to Work

It's indestructible. It's fungible. It's beautiful. And for Indians, gold -- whether it's 18, 22, or 24-carat -- is semi-sacred.

The late distinguished Indian economist I.G. Patel observed, "In prosperity as in the hour of need, the thoughts of most Indians turn to gold."

No marriage takes place without gold ornaments presented to the bride. Even the poorest Indian outfits girls in the family with a simple nose ring of gold.

The India of old was known as "sone ki chidiya" or "golden sparrow," so opulent were the jewels of its rulers from the Moghul dynasty to the princely states.

For Indian women who were not formally educated, gifting them gold was their social security. Today, whether Hindu, Christian, Buddhist, or Muslim, bedecking the bride in gold invests her with good fortune, according to anthropologist Nilika Mehrotra.

This story, posted on the npr.org Internet site in the wee hours of yesterday morning, was something I found posted on the gata.org Internet site yesterday as well.  Its real headline reads "A Gold Obsession Pays Dividends For Indian Women".  Needless to say, it's worth reading.

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Koos Jansen: Shanghai Withdrawals Falling but Still Above Last Year's

Weekly withdrawals from the Shanghai Gold Exchange have been declining for five weeks but remain above withdrawals for the same period last year, gold researcher and GATA consultant Koos Jansen reports at the Swiss Internet site ingoldwetrust.ch.

This is another gold-related news item I found on the gata.org Internet site yesterday.

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Grant Williams: All Markets Are Rigged, Maybe Gold Most of All

All markets are rigged these days, perhaps the gold market most of all, fund manager Grant Williams writes in the new edition of his Things That Make You Go Hmmm... newsletter.

Williams writes: "In order for market rigging to be stopped, the changes have to come from those entrusted with regulation, in the form of stern punishments for those caught rigging them, and there must be changes to the rules to close the loopholes that allowed this kind of activity to occur in the first place.

"Instead, the bodies which supposedly oversee the markets are involved in the most serious rigging of all.

Grant's gold commentary isn't very long---and there isn't anything in it that you haven't see already in this column---but it, along with the rest of the column [which is a big read], is definitely worth your time.  I thank Chris Powell for wordsmithing the above two paragraphs of introduction.

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Apr 12, 2014

SEC Eyes Test That May Lead to Shift Away from "Dark Pools"

U.S. securities regulators are considering testing a proposed reform that could drive business to major stock exchanges and away from alternative trading venues such as "dark pools" that critics say may be hurting investors by reducing the quality of pricing.

The proposal, which has so far only been discussed among staff involved in policy making at the U.S. Securities and Exchange Commission, could limit how much trading occurs inside brokerages and in dark pools, according to people familiar with the matter.

The measure aims to address a concern among some regulators and academics about the increasing level of trading that happens outside of exchanges.

They say that the amount of trading being done in the "dark" means that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is, meaning that investors may not be getting the best prices for their trades.

This Reuters story, co-filed from Washington and New York, was posted on their website very early yesterday morning EDT---and I thank West Virginia reader Elliot Simon for today's first news item.  It's definitely worth reading.

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Doug Noland: Financial Stability

So I’m seeing significant confirmation of the bearish thesis – fundamentally and more recently in the marketplace. The global liquidity backdrop has become less bullish. Central bank liquidity has peaked. A strong yen restrains “carry trade” speculative leveraging, while changes in China’s currency management regime reduce the incentive for yuan “carry trades.” Especially with the prospect of Fed balance sheet growth ending later this year, the notion of the Fed as the markets’ liquidity backstop is now in question. From my perspective, the leveraged speculating community will need to adjust to a much less favorable backdrop for risk-taking and leveraging. The marginal operator in the marketplace is evolving from buyer to seller; from risk-taker to risk reducer and hedger; from liquidity provider to liquidity taker.

While I don’t expect market volatility is going away anytime soon, I do see an unfolding backdrop conducive to one tough bear market. Everyone got silly bullish in the face of very serious domestic and global issues. Global securities markets are a problematic “crowded trade.” Marc Faber commented that a 2014 crash could be even worse than 1987. To be sure, today’s incredible backdrop with Trillions upon Trillions of hedge funds, ETFs, derivatives and the like make 1987 portfolio insurance look like itsy bitsy little peanuts. So there are at this point rather conspicuous reasons why Financial Stability has always been and must remain a central bank’s number one priority (whether Dr. Evans appreciates this or not). Just how in the devil was this ever lost on contemporary central bankers?

Doug's most excellent commentary was posted on the prudentbear.com Internet site early yesterday evening---and I thank reader U.D. for sending it our way.

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Debt-Laden France Sells Off Lavish Foreign Properties

The official Manhattan residence of France’s ambassador to the United Nations went on sale this week, with French authorities hoping to collect 34.5 million euros ($48 million) for the luxury property.

The sale of the 18-room duplex overlooking Park Avenue – located in the same building that Jackie Kennedy and John D. Rockefeller at one time called home – has been planned for over one year, and it is part of a wider effort by the Foreign Ministry, known in France as the Quai d'Orsay, to slash costs across the globe.

The sale of the Park Avenue apartment was in line with a new “streamlined management of the ministry’s real estate stock,” Dana Purcarescu, spokeswoman for France’s embassy in Washington, told Reuters on Thursday.

While France is still a key player on the global stage, as military interventions in Africa have recently highlighted, it is no secret the former imperial giant has ceded influence to other Western and emerging powers over the years.

This interesting news item appeared on the france24.com Internet site yesterday---and I thank South African reader B.V. for sliding it into my in-box just before I hit the send button on today's column.

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Germany Risks EU Fines with Record Current Account Surplus

Germany's current account surplus will smash all records this year, risking a serious political showdown with Brussels and the ultimate sanction of EU fines.

A joint report by the leading German institutes, or "Wise Men", said the country's external surplus would keep rising to a modern-era high of 7.9% of GDP this year, far above the 6% limit set by Brussels under the new Macroeconomic Imbalance Procedure.

The Commission warned Germany late last year that it faced possible sanctions if failed to do its "homework", either by boosting consumption at home or by weaning its economy off excess reliance on foreign markets. The threat caused consternation in Germany's press and a vitriolic exchange with Brussels.

Well, dear reader, you have to ask yourself just one question---and that is "How did it come to this?"---penalizing a country for being too successful.  This Ambrose Evans-Pritchard commentary was posted on the telegraph.co.uk Internet site very early Thursday evening BST---and it's the first contribution of the day from Roy Stephens.  It's certainly worth skimming.

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EU Taking Putin's Letter on Gas Transit "Seriously" – Merkel

The EU is taking seriously President Vladimir Putin’s letter to 18 European countries, in which he warned that Ukraine’s debt crisis could affect gas transit from Russia, German Chancellor Angela Merkel said.

"There are many reasons to seriously take into account this message […] and for Europe to deliver a joint European response,” Itar-Tass reported Merkel as saying.

She said the issue would be discussed in a meeting between European Union foreign ministers Monday.

This news item showed up on the Russia Today website early yesterday evening Moscow time---and it's another contribution from Roy Stephens.

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Europe Folds as Putin Tells It to Pay Ukraine's Gazprom Bill, or Else

Another day ending in "y" means another day in which Putin plays the G(roup of most insolvent countries)-7 like a fiddle.

The latest: Europe should provide aid to Ukraine to ensure uninterrupted natural-gas deliveries to the region, President Vladimir Putin’s spokesman said as reported by Bloomberg.

"Russia is the only country helping Ukraine’s economy with energy supplies that are not paid for,"  Dmitry Peskov told reporters today in Moscow,  commenting on President Vladimir Putin’s letter yesterday to 18 European heads of state. “The letter is a call to immediately review this situation, which is absurd on the one hand and critical on the other.

Here's the Zero Hedge take on all this.  This commentary was posted on their website yesterday morning---and I thank reader B.V. for his second contribution to today's column.

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All Hail the Draghi Put: The Global Bond Market Is Now Well and Truly Broken

The evil of modern central banking can nowhere better be seen than in this week’s mad stampede into $4 billion of Greek bonds. The fact is, Greece is not creditworthy at nearly any coupon yield, but most certainly not at the 4.75% sticker that was attached to the offering.

After a 20% contraction the Greek economy has been literally eviscerated—with not much left except tourism, yogurt plants and a 27% unemployment rate. It has an impossible debt-to-GDP ratio of 170% and, worse still, almost all of that debt is owned by EC institutions and the IMF. That is, this week’s “winners” stand in line behind the “bail-you-in-first-brigade” that will find some way to crush private investors—-English law indentures or not—when repayment of their own tower of loans comes into question.

And the claim that Greece’s fiscal affairs have turned for the better is really preposterous.  Like Italy and some of the other PIIGS, the Greek government has discovered the trick of off-balance sheet financing by stiffing its vendors. The backlog of “payables” to pharmacies, hospitals, doctors, garbage haulers, road maintenance vendors and countless more, along with deep arrearages in payments to pensioners and other transfer payment beneficiaries, has been manipulated by the finance ministry and their Brussels overseers to a far-thee-well, and now totals in the tens of billions.

This commentary by David Stockman showed up on the Zero Hedge website late yesterday evening---and my thanks go out to reader Harry Grant for sending me this, as he just made it under the wire at 5:18 a.m. EDT.

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Seymour M. Hersh: Turkey – The Red Line and the Rat Line

In 2011 Barack Obama led an allied military intervention in Libya without consulting the U.S. Congress. Last August, after the sarin attack on the Damascus suburb of Ghouta, he was ready to launch an allied air strike, this time to punish the Syrian government for allegedly crossing the "red line" he had set in 2012 on the use of chemical weapons. Then with less than two days to go before the planned strike, he announced that he would seek congressional approval for the intervention. The strike was postponed as Congress prepared for hearings, and subsequently cancelled when Obama accepted Assad’s offer to relinquish his chemical arsenal in a deal brokered by Russia. Why did Obama delay and then relent on Syria when he was not shy about rushing into Libya? The answer lies in a clash between those in the administration who were committed to enforcing the red line, and military leaders who thought that going to war was both unjustified and potentially disastrous.

Obama’s change of mind had its origins at Porton Down, the defence laboratory in Wiltshire. British intelligence had obtained a sample of the sarin used in the 21 August attack and analysis demonstrated that the gas used didn’t match the batches known to exist in the Syrian army’s chemical weapons arsenal. The message that the case against Syria wouldn’t hold up was quickly relayed to the US joint chiefs of staff. The British report heightened doubts inside the Pentagon; the joint chiefs were already preparing to warn Obama that his plans for a far-reaching bomb and missile attack on Syria’s infrastructure could lead to a wider war in the Middle East. As a consequence the American officers delivered a last-minute caution to the president, which, in their view, eventually led to his cancelling the attack.

For months there had been acute concern among senior military leaders and the intelligence community about the role in the war of Syria’s neighbours, especially Turkey. Prime Minister Recep Erdoğan was known to be supporting the al-Nusra Front, a jihadist faction among the rebel opposition, as well as other Islamist rebel groups. ‘We knew there were some in the Turkish government,’ a former senior US intelligence official, who has access to current intelligence, told me, ‘who believed they could get Assad’s nuts in a vice by dabbling with a sarin attack inside Syria – and forcing Obama to make good on his red line threat.’

This essay, a must read for all serious students of the New Great Game, is one of the most serious pieces of investigative journalism that you're likely to see anywhere.  This is what the main stream press used to be like.  The story also falls into two different categories.  The first is, "you can't make this stuff up"---and the second is "the truth is stranger than fiction."  I hope you have time to read it, as it's sure to be a movie script some day.  I thank Casey Research's own Nick Giambruno for sending this my way on Monday, but for obvious reasons, it had to wait for my Saturday column.

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Dust Storms Cloud Iran’s Future

Iran is, literally, being blown away. Stifling dust storms frequently now envelop both big cities and rural towns across much of Iran, the world’s 17th-largest country. They threaten to disrupt crucial parts of public and economic life, education, commerce, public health, agriculture, trade and transportation. Swirling clouds of windblown silt, soil, and sediment already affected 23 of Iran’s 31 provinces in 2013, according to Vice President Masoumeh Ebtekar, head of the country’s Environmental Protection Organization.

Iran’s massive dust storms could also spill well across Iran’s borders, generating serious regional consequences and tensions. Dust clouds veiled Tehran for 117 days of the Iranian year, which ran from March 2012 to March 2013. And blinding sand storms blocked roads across the eastern province of Sistan and Baluchistan last summer, isolating nearly 60 towns and villages.

Dust storms regularly arise in arid and semi-arid regions around the world. Indeed, the Islamic Republic sits in the center of a Northern Hemisphere “dust belt” stretching from the west coast of North Africa, through the Middle East, and across South and Central Asia to China. Winds gusting over the open, level landscape of Iran’s dry plateaus, deserts, and salt flats readily pick up loose soil and sand, lifting bits of dirt and grit into the atmosphere and carrying it tens, hundreds, or even thousands of miles away.

I posted a story on this issue last year, but this two-page essay by David Michael really fleshes it out.  It showed up on the Asia Times website yesterday sometime---and if you don't read it, then you should at least look at the pictures.  I thank Roy Stephens for bringing it to our attention.

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Global Warming Scare Tactics

If you were looking for ways to increase public skepticism about global warming, you could hardly do better than the forthcoming nine-part series on climate change and natural disasters, starting this Sunday on Showtime. A trailer for Years of Living Dangerously is terrifying, replete with images of melting glaciers, raging wildfires and rampaging floods. “I don’t think scary is the right word,” intones one voice. “Dangerous, definitely.”

Showtime’s producers undoubtedly have the best of intentions. There are serious long-term risks associated with rising greenhouse gas emissions, ranging from ocean acidification to sea-level rise to decreasing agricultural output.

But there is every reason to believe that efforts to raise public concern about climate change by linking it to natural disasters will backfire. More than a decade’s worth of research suggests that fear-based appeals about climate change inspire denial, fatalism and polarization.

This short op-ed piece showed up on the New York Times website on Tuesday---and because of the content, had to wait for today's column.  It's also courtesy of Roy Stephens.

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China Fake Data to Skew More Export Numbers

China's data distortions will muddy analysis of the nation’s trade until at least June, making it harder to assess the strength of the world’s biggest exporter and second-largest economy.

That’s when China will provide figures that compare with what Royal Bank of Scotland Group Plc economist Louis Kuijs says are “pretty clean” numbers from May 2013 that followed a crackdown on inflated invoices used to disguise capital inflows. Government data yesterday that showed March exports unexpectedly fell 6.6% from a year earlier marked the peak of distortions, RBS said.

China’s reluctance to revise figures it’s acknowledged were inflated has left the job of explaining why the trade numbers are better than they appear to analysts like Kuijs, as the nation endures its worst economic slowdown since the global financial crisis. The distortions add to investor and analyst concerns that the quality of data from jobs to gross domestic product isn’t good enough for a country that’s driving commodity prices and Asian growth.

This Bloomberg news item, filed from Beijing, was posted on their Internet site Thursday evening Denver time---and I thank Elliot Simon for sharing it with us.

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Forex Scandal Hits Singapore Central Bank

A suspended Deutsche Bank trader may have had inappropriate links to the Monetary Authority of Singapore (MAS), it emerged yesterday.

London-based sales director Kai Lew was put on leave last month as part of the bank's internal probe into alleged foreign exchange benchmark manipulation.

The action was taken because she had communicated improperly with MAS, the Wall Street Journal reported yesterday.

The revelation means Singapore's central bank joins the Bank of England in having links with the emerging scandal.

This short news item was posted on the kitco.com Internet site yesterday---and it's courtesy of reader B.V.

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Three King World News Blogs

1. Egon von Greyerz: "Global Implosion---and Why the IMF Just Lied to the Entire World"  2. Dr. Paul Craig Roberts: "2014 Will Be a Year of Reckoning For the U.S."  3. John Hathaway: "Remarkable Events Taking Place As the War in Gold Heats Up".

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]

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John Hathaway: Tocqueville Gold Strategy Investor Letter, First Quarter 2014

We observe that many investors who understand, and may well have been deeply committed to the investment rationale for gaining exposure to potential currency debasement, have been scarred by two extremely difficult years of negative performance and are therefore on the sidelines looking for a comfortable point to reenter the sector. In the meantime, we have witnessed the entry of contrarian value investors whose rationale can be summed up as viewing gold mining shares as an inexpensive way to protect capital in the event of a broad correction in equity and capital markets. It seems highly certain to us that the positive returns generated by equity markets over the past two years have represented a substantial barrier for capital to reenter precious metals. We therefore believe that a bear market in equities would constitute a catalyst to drive gold and precious metals equities sharply higher.

In terms of supply and demand flows, the stage is set in our opinion for higher gold prices. No mining company management in its right mind would commit to a program of mine construction at current prices. Therefore, we believe that mine supply will shrink in the years ahead, especially after 2015. Given the lead times involved in new mine construction and even with a moderately rising trend in gold prices, supply could be constrained through the end of the current decade. The demand picture, especially from Asian consumers and possible central banks, looks robust. The flow of gold into China continues to set records and the all-important consumption by the Indian subcontinent remains solid. The Chinese government, acutely aware to the downside risks of its $4 trillion exposure to the US currency, has almost certainly been surreptitiously accumulating physical gold as a hedge. There has been no update from official sources on central bank holdings since 2009, and if China is still in an accumulation mode, one can be certain that they have taken full advantage of the two year price decline and that their future intentions remain a well-guarded secret.

This commentary by John was posted on the tocqueville.com Internet site early yesterday evening---and it's a must read for sure.  It's the same commentary that was posted in the King World News section just above this story, but without the perpetual hyperbole---and with the correct headline.

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Sprott Money Weekly Wrap-Up with Rick Rule

This week, Rick Rule discusses the debate between emerging markets and central banks, impact of South African strikes to platinum supply and prices, and differences between Japan and US economies.

This 8:47-minute audio interview was posted on the sprottmoney.com Internet site yesterday---and I'm not in a position to comment on it, as I haven't had the time to listen to it as of yet.

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Koos Jansen: New Physical Gold Exchange in Singapore

I was tipped of by one of my readers on a new gold exchange operating in Singapore; Allocated Bullion Solutions Singapore. After taking a look on their website I asked their public relations desk for the details of their business. Websites can be incomplete and I wanted to be sure on what kind of exchange it was. They kindly responded whereupon a comprehensive Q&A followed.

This item was posted on the ingoldwetrust.com Internet site yesterday---and I found it embedded in a GATA release.

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Alasdair Macleod: Gold and Bail-Ins

Even allocated gold probably isn't safe in an insolvent bank being restructured under government supervision, GoldMoney research director Alasdair Macleod writes today, especially since Western central banks may no longer have the gold they long have used to rescue bullion banks in trouble.

Alasdair's commentary is headlined Gold and Bail-Ins and it's posted at GoldMoney's Internet site.  This is another item I found on the gata.org Internet site yesterday.

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Gold Rush Threatens West Africa's Cocoa Future

A month ago, Bouafu Kouassi dug a neat circular hole in the middle of his one-hectare cocoa plantation in western Ivory Coast, and, sifting through the gravel on his shovel, found the unmistakeable traces of gold dust.

With luck, it could transform his life, but it could just destroy his farm. And as the story repeats across the cocoa heartland of the world's top producer and neighbouring Ghana, the second-largest, it could do lasting damage to the industry.

Today, nearly three dozen vertical shafts plunge down into the soil beneath Kouassi's cocoa trees, branching out into a web of underground tunnels 10 metres below the surface.

This longish, but very interesting Reuters essay---filed from Yoho, Ivory Coast---was posted on their website early yesterday morning BST---and I thank reader B.V. for his final contribution to today's column.  It's worth reading if you have the time---and/or the interest.

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Gold Smuggling Arrests Jump 750% YoY in India

While cases of gold smuggling in India have jumped 265% from 40 in 2012-13 to 146 in 2013-14, the number of people arrested has shot up by 750%, from 30 in 2012-13 to 255 in 2013-14, data from the Directorate of Revenue Intelligence shows.

"Gold imports through the legal channel have come down considerably. The chorus to decrease import duty is gaining everyday, and the recent trade figures are indicative that things have slumped to a new low," said Manish Kedia, bullion trader.

Data shows that gold smuggling cases at the Sardar Vallabhbhai Patel International Airport in Ahmedabad, have jumped 15 times in the last one year. Around 75% of the gold seized by customs officials at the airport in 2013-14 has been after August 2013, when the Indian government slapped 10% duty on gold imports.

This gold-related news story, filed from Mumbai, was posted on the mineweb.com Internet site yesterday sometime.

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Pressure on India to Cut Gold Duty Mounts

The stage appears to be set for India to reduce import duty on gold.

Government data released on Friday showed that gold and silver imports have declined 40% to $33.46 billion in 2013-14, as compared to the $55.79 billion in 2012-13. India's exports have jumped a bit, while imports dipped by over 8% narrowing the trade deficit.

A sharp decrease in gold and silver imports has also helped narrow the trade gap to $138.59 billion from $190.33 billion, though crude oil imports continued to surge ahead.

Bimal Jalan, former governor with India's central bank, the Reserve Bank of India (RBI), told newspersons that if India's current account deficit (CAD) "is okay, and it is comfortable just now, there is no reason to control gold imports, particularly if (gold) prices are reasonable."

Here's another story from the mineweb.com Internet site yesterday.  This one was also filed from Mumbai.

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Hugely Outnumbered – Western Gold Bears by Asian Gold Enthusiasts

Within an interesting almost hour-long discussion published on Chris Martenson’s Peak Prosperity website, Alasdair Macleod of Gold Money made the interesting – but in retrospect, patently obvious – comment that gold buyers and sellers in the West are hugely outnumbered by a traditionally gold hoarding community in Asia. And as Asian economies develop, this gold-oriented (carefully chosen word!) community is expanding rapidly as is its purchasing power. Macleod commented thus: “The point is there are 4 billion people in Asia who have got a very old-fashioned view of gold, and they have become wealthy over the last 20 years. And their view is likely to prevail against the ~1 billion of us in North America and Western Europe. I mean it really is as simple as that. It's not a question of Austrian economics, or Keynesian, or whatever. We're outnumbered.” 

This Asian appetite for gold has been expanding. It certainly hit a record last year as seen by the enormous volumes of recorded Chinese imports and gold movements out of the Shanghai Gold Exchange, the anecdotal evidence of a huge amount of gold being smuggled into India to try and circumvent the country’s gold import restrictions, and the massive level of gold trade seen through Dubai – most of which will have been destined for points East. Now even if this gold demand stutters this year given a growth downturn in the Chinese economy, it will still remain at an extremely high level – indeed Hong Kong has already reported record gold export figures to mainland China for the first two months of the year, with these figures supported by data showing big withdrawals of gold through the Shanghai Gold Exchange. With the prospect, perhaps likelihood, of India’s gold import restrictions being reduced, or lifted altogether one suspects that overall Eastern demand will continue to remain strong through the year, easily soaking up new mine supply and any forced sales out of the gold ETFs.

This commentary by Lawrie was posted on the mineweb.com Internet site yesterday as well.

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Apr 11, 2014

Marc Faber's dire warning for the market

Marc says that the 2014 crash will be worse than 1987.  This 11:52 minute video clip was posted over at the CNBC website very early yesterday afternoon EDT---and today's first news item is courtesy of reader Ken Hurt.

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US Budget Deficit Falls In March To $37 Billion

The U.S. government's budget deficit shrank to just $37 billion in March from $107 billion in the same month last year, the latest sign of improvement in the nation's finances. The deficit was the lowest for the month of March in 14 years.

The deficit fell partly because revenue jumped 16 percent to $216 billion, the Treasury Department said in its monthly budget report Thursday. Individual income and Social Security tax receipts have increased as employers have steadily hired more workers in the past year.

And if you believe that's actually true, then I really do have this bridge I'd like to unload---and you look like the perfect buyer.  This AP story showed up on the kitco.com Internet site at 2 p.m. EDT yesterday---and I thank West Virginia reader Elliot Simon for bringing it to our attention.

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Internet giants to government: We can spy on customers’ data, you shouldn’t

Silicon Valley has been largely speaking out as of late against the United States government’s controversial surveillance programs, but some say the nation’s top cyber firms are scared that their own abilities to collect info could soon be eroded.

Months into the ongoing and always heated debate about the U.S. National Security Agency’s spy operations, President Barack Obama said last December that he had appointed a small panel of experts to assess the NSA programs in question that had been exposed after former contractor Edward Snowden started to disclose classified documents earlier that year. That review group has since presented a few dozen recommendations to the White House, and last month President Obama asked Congress to codify into law changes concerning the way that the US government gets access to certain sensitive records — namely the telephony metadata created by telecommunication companies and currently gathered in bulk by the NSA, as exposed by Mr. Snowden.

In January, however, the president also said a separate group would reach out to privacy experts, technologists and business leaders to inspect the way that “big data” is created, collected and used by both the public and private sector, and “whether we can forge international norms on how to manage this data and how we can continue to promote the free flow of information in ways that are consistent with both privacy and security.”

This article showed up on the Russia Today website late yesterday afternoon Moscow time---and it's the first offering of the day from Roy Stephens.

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More than 40,000 signed for 'Alaska Back to Russia' petition

The petition on Alaska going back to Russia, posted on the White House website on March 21st 2014, has since been signed by over 40,000 people. It should be signed by at least 100,000 by April 20th so the US authorities come up with an official response.

The petition points out that those residing in Siberia crossed into Alaska via Bering Strait ages ago.

Russians became the first Europeans to appear in Alaska on August 21st 1732. The actual discoverers are the St. Gabriel ship crew under land surveyor Gvozdev and junior sailing master Fyodorov, who were part of the 1729-1735 Shestakov and Pavlutsky-led expedition.

This rather amusing news item appeared on the Voice of Russia website early yesterday evening Moscow time---and if you're looking for a short history of Alaska before the U.S bought it from the Russians for a song in 1867---this is a must read.  It's the second offering in a row from Roy Stephens, for which I thank him.

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Draghi Seen Easing Policy by June as ECB Readies Rate Cut

Mario Draghi will probably take action within two months against the threat of deflation, economists said.

Almost two-thirds of respondents in the Bloomberg Monthly Survey predicted the European Central Bank president will ease policy by June. Of those economists, just under half said he may implement multiple measures ranging from interest-rate cuts to asset purchases and long-term loans.

With euro-area inflation at the weakest in more than four years, Draghi says he has “unanimous” backing from policy makers for unconventional measures if needed. Even so, recent comments show officials haven’t yet agreed on which tools to use, setting them up for discussions on whether to take an unprecedented leap into quantitative easing or rely on smaller and more-targeted initiatives.

This Bloomberg article, filed from Frankfurt, was posted on their website in the wee hours of Thursday morning Denver time---and I thank reader Ward Pace for sending it our way.

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Christine Lagarde: Huge Government and banks debts risk new financial crash

George Osborne is to tell an audience of free-market campaigners in Washington that the UK's economic turnaround will defy those who say austerity and low wage growth will lead to long-term stagnation. In his first major speech in the US, the chancellor will attempt to demolish claims that a further five years of austerity will restrict growth and hurt workers' living standards.

Osborne will argue at the American Enterprise Institute that low interest rates, the Bank of England's creation of new money through massive bond purchases under its quantitative easing programme and a strengthened banking sector can secure a bright future for the UK.

Osborne's speech comes after head of the International Monetary Fund, Christine Lagarde, issued a warning to world leaders that they need to do more to deal with huge government and bank debts that she said continue to drag down growth and undermine the stability of the financial system. Speaking at the IMF's spring conference, Lagarde said leaders needed to co-operate in their efforts to repair public sector and bank finances to protect against a repeat of the 2008 crash.

This article from The Guardian has had a major headline change, as you'll find out if you click on the link. It now reads a much softer sounding "George Osborne to use first major U.S. speech to rebuke critics of austerity."  It was posted on their website early yesterday afternoon BST---and I thank South African reader B.V. for digging it up on our behalf.

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Top economists warn Germany that EMU crisis as dangerous as ever

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.

"Debts above 130pc of GDP for Italy and 170pc for Greece are a recipe for disaster once we go into the next downturn," said Professor Charles Wyplosz, from Geneva University.

"Today's politicians believe the crisis is over and don't want to hear any more about it, but they have not tackled the core issues of fiscal union and public debt," he said, speaking at Euromoney's annual Germany conference.

This Ambrose Evans-Pritchard offering showed up on the telegraph.co.uk Internet site very early on Wednesday evening BST---and I thank Roy Stephens for another contribution to today's column.

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Angela Merkel denied access to her NSA file

The U.S. government is refusing to grant Angela Merkel access to her NSA file or answer formal questions from Germany about its surveillance activities, raising the stakes before a crucial visit by the German chancellor to Washington.

Merkel will meet Barack Obama in three weeks, on her first visit to the US capital since documents leaked by whistleblower Edward Snowden revealed that the NSA had been monitoring her phone.

The face-to-face meeting between the two world leaders had been intended as an effort to publicly heal wounds after the controversy, but Germany remains frustrated by the White House's refusal to come clean about its surveillance activities in the country.

This story is from theguardian.com Internet site---and it was posted there very early yesterday evening British Summer Time.  It's certainly worth reading.

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Is the U.S. or the World Coming to an End? — Paul Craig Roberts

2014 is shaping up as a year of reckoning for the United States.

Two pressures are building on the US dollar. One pressure comes from the Federal Reserve’s declining ability to rig the price of gold as Western gold supplies shrivel and market knowledge of the Fed’s illegal price rigging spreads. The evidence of massive amounts of naked shorts being dumped into the paper gold futures market at times of day when trading is thin is unequivocal. It has become obvious that the price of gold is being rigged in the futures market in order to protect the dollar’s value from QE.

The other pressure arises from the Obama regime’s foolish threats of sanctions on Russia. Other countries are no longer willing to tolerate Washington’s abuse of the world dollar standard. Washington uses the dollar-based international payments system to inflict damage on the economies of countries that resist Washington’s political hegemony.

Russia and China have had enough. As I have reported---and as Peter Koenig reports, Russia and China are disconnecting their international trade from the dollar. Henceforth, Russia will conduct its trade, including the sale of oil and natural gas to Europe, in rubles and in the currencies of its BRICS partners.

This commentary by Paul falls into the must read category as far as I'm concerned, especially for any serious student of the New Great Game.  I thank Luxembourg reader Rudi Staudinger for bringing it to our attention.

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Chinese exports and imports fall sharply in March

The country's exports fell by 6.6% in March when compared with the previous year.

Imports dropped by 11.3% in the same month, when compared with the same time last year.

This is the second straight month of falling exports for China. In February, exports dropped by 18.1%.

It is the first time since 2009 that exports have fallen for two months in a row.

This news item showed up on the bbc.com Internet site a few minutes after midnight EDT on Thursday morning---and it's worth reading.  I thank reader B.V. for sending it our way.

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Bank of China Sydney branch issues 2 billion yuan bonds

Bank of China's Sydney branch issued 2 billion yuan (325 million U.S. dollars) of yuan bonds on Wednesday, the first yuan bond in Australia, the bank announced on Thursday.

The two-year bonds, with a coupon rate of 3.25 percent, were well-received in the market, oversubscribed 1.45 times.

Some 27.5 percent of the bonds were subscribed by local investors, said the bank.

This short article appeared on the xinhuanet.com Internet site early yesterday evening Beijing time---and I thank reader 'David in California' for sharing it with us.

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Five King World News Blogs/Audio Interviews

1. William Kaye [#1]: "Gold Delivery Strains Reappear---and What Might Destroy COMEX"  2. Art Cashin: "Critical Metric is Now Over 1,000 Times Higher Than Normal!"  3. Jean-Marie Eveillard: "U.S. Gold Gone---and What 52 Years in This Business Taught Me"  4. William Kaye [#2]: "The Secret That Has U.S. and Western Leaders Truly Terrified"  5. The audio interview is with Gerald Celente

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]

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Blythe Masters Under Investigation By Federal Prosecutors

There is much new info in the just released Bloomberg profile on the infamous ex-JPMorganite Blythe Masters, among which the disclosure that she had made it clear that she had wanted to go along with the disposable JPM physical commodities unit (which as was reported recently, was sold to Swiss commodities giant Mercuria) and "and continue as the group's chief", a plan which did not work out as she had planned since she has no plans to "join the unit’s purchaser" (although joining Glencore is another matter entirely, and one which looks increasingly plausible) but what we find most striking is the following revelation: "Masters is under investigation by federal prosecutors in Manhattan, according to two people with knowledge of the matter. That probe was opened following a settlement with regulators that alleged JPMorgan manipulated power markets in the Midwest and California."

This is somewhat ironic because it was none other than Zero Hedge which asked nearly a year ago if "JPMorgan's "Enron" Will Be The End Of Blythe Masters?" Suddenly, the answer appears to be yes.

This very interesting commentary over at Zero Hedge was posted on their website very late yesterday evening EDT---and it's definitely worth reading.  My thanks go out to Elliot Simon for bringing it to my attention---and now to yours.

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Pat Heller: U.S. has rigged precious metals markets for 80 years

Writing for Coin Week, Patrick Heller of Liberty Coin Service in Lansing, Michigan, provides a brief history of the U.S. government's mechanisms of surreptitious market intervention and headlines his commentary, "The U.S. Government Has Rigged Precious Metals Markets For 80 Years".

I found this article in a GATA release last evening.

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Chris Martenson and Alasdair Macleod discuss China's corner on gold

Market analyst Chris Martenson and GoldMoney's Alasdair Macleod discuss China's increasing control of the gold market, anti-gold propaganda in the Western financial news media, the likelihood that Western governments will commandeer the gold of private investors, and other provocative topics in an interview posted this week in audio and text versions at Martenson's Internet site, peakprosperity.com

The audio interview runs for 54:32 minutes, so top up your coffee or blow the froth off a cold one.

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U.S. mined silver output continues to fall--USGS

U.S. mines produced 80,900 kilograms (2,600,995 troy ounces) of silver in November 2013, a 14% decrease from the 94,300 kg (3,031,815 oz) produced in November 2012, the U.S. Geological Survey reported.

Monthly silver production continued on a downward trend that began in June 2013, the USGS observed.

Average daily U.S. silver production in November 2013 was 2,700 kg (86,807 oz), compared with 3,140 kg (100,953 oz) in November 2012.

The Silver State of Nevada led silver production in November 2013 with 19,700 kg (633,369 oz) of output, while the combined total production of Alaska, Arizona, California, Colorado, Idaho, Missouri, Montana, New Mexico, South Dakota and Utah was 60,900 kg (1,957,980 oz).

Total U.S. silver output from January to November 2013 totaled 956,000 kg (30,736,114 oz), said the Geological Survey.

Wow!  U.S. silver production is even worse than I imagined it to be---only a bit over 33 million ounces per year based on current production rates.  That means that the U.S. Mint has to import about 10 million ounces of silver per year just to meet demand.  One has to wonder how much more has to be imported on a yearly basis to meet the rest of U.S. silver demand.  I would bet that it's a lot.  The above five paragraphs are all there is to this news item that was posted on the mineweb.com Internet site just after midnight Reno time this morning, but it's worth reading a second time if you've already read it.

By the way, here's a link to the Top 10 silver producers in 2013.

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Lawrence Williams: Silver being left behind in latest gold price surge – but don’t despair!

Silver investors will have been a little disappointed by the metal’s performance vis-à-vis the gold price following the latter’s gains after the release of the latest U.S. FOMC meeting minutes. The minutes suggested that the low interest rate regime may well continue longer than expected and resulted in a major boost to the stock market and a significant uptick in the gold price. But it had rather less impact on silver which initially remained stuck below the $20 mark, although this morning’s trade has at last see it move up above this mark. Perhaps European investors are less pessimistic about silver’s investment credentials.

Now silver usually moves with gold, but in a more exaggerated manner so the silver investors could have been forgiven for expecting that the near 2% rise in the gold price since Tuesday would be accompanied by an even greater rise in silver in percentage terms. This may yet happen should the gold price continue its latest mini-surge, but silver has been more volatile and indeed the price actually fell back sharply on some adverse comment in the U.S. before recovering quite well in this morning’s trade… But over the same 3 day period that gold rose the 2% mentioned above the silver price was, in effect, following a very sharp temporary dip yesterday.

So why is silver behaving in this manner. Perhaps the short answer is China.

That's not the short answer---and Lawrie knows it.  But why he won't say it in the public domain is beyond me.  Silver analyst Ted Butler says that JPMorgan Chase has a 20,000 contract short-side corner in the Comex futures market in silver---which represents 16% of the total net open interest as of last Friday's Commitment of Traders Report.  They, along with the smaller Commercial traders, run the show in silver---and the other three precious metals as well.  End of story.  If you read this commentary, I would do it for entertainment purposes only.

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Apr 10, 2014

If this happens, the S&P 500 is in real trouble: Yamada

After two tough sessions for the market, the S&P 500 hit a one-month low on Tuesday morning before turning positive for the day. But technical analyst Louise Yamada says the stock slide isn't over just yet.

"I don't think the pullback is already over," Yamada, of Louise Yamada Technical Research Advisors, said on Tuesday's episode of "Futures Now."  I think that it's an interim pullback, and we've certainly seen what we've expected, in the Internet and biotechs coming off. And I think that although they may bounce, there's probably still a little bit more to go on the downside."

Worse yet, the selling could spread to other sectors, such as aerospace and consumer discretionary stocks.

This CNBC news item was picked up by the finance.yahoo.com Internet site on Tuesday afternoon just before the markets closed in New York.  I thank reader David Ball for today's first story.

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Wall Street soars after Fed minutes signal support

U.S. stocks rallied on Wednesday after minutes from the Federal Reserve's latest policy meeting showed a more supportive central bank than investors had previously expected.

All three major U.S. stock indexes ended up more than 1 percent, with eight of the 10 S&P 500 sector indexes closing higher. Internet and biotech stocks were among the day's biggest gainers.

Fed policymakers were unanimous in wanting to ditch the thresholds they had been using to telegraph a policy tightening, according to minutes of a meeting last month that shed little new light on what might prompt an eventual interest-rate rise.

"People are taking solace in the idea that the Fed may be more accommodative than previously thought, for longer than previously thought," said Steve Sosnick, equity-risk manager at Timber Hill/Interactive Brokers Group in Greenwich, Connecticut.

This Reuters story, was also picked up by the yahoo.com Internet site, but this one showed up on their Internet site shortly after the markets closed yesterday.  I found this article on their website when I was checking out today's first story.

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BofA to pay $727 million to consumers over credit card practices

Bank of America agreed to pay nearly $800 million in fines and restitution to settle allegations of deceptive marketing and unfair billing involving credit card products, U.S. regulators said on Wednesday.

The Consumer Financial Protection Bureau and Office of the Comptroller of the Currency said they had ordered the bank to pay $727 million in relief to consumers to resolve problems with add-on products providing identity theft and payment protection products.

The bank must also pay fines of $20 million to the bureau $25 million to the OCC.

"We have consistently warned companies about illegal practices related to credit card add-on products," bureau Director Richard Cordray said in a statement. "We will not tolerate such practices and will continue to be vigilant in our pursuit of companies who wrong consumers in this market."

This Reuters story showed up on their Internet site late yesterday afternoon EDT---and I thank Harry Grant for sending it to me just after midnight MDT.

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98% of All Consumer Credit in Past Year Was Student and Car Loans

Same sh*t, different month. If last month total consumer credit increased by $13.8 billion, of which $14.0 billion went into student and car loans meaning consumers continued de-leveraging on their credit card statements (some expectation for a recovery there), then February was even worse. The headline number was great: $16.5 billion, well above the $14.0 billion expected. The problem is that of this number well more than 100%, or $18.9 billion was once again slated for car purchases and paying down "student bills" (not really - as has been reported numerous times before Americans increasingly use student loans as a means to pay for everything else but tuition).

In other words, anyone suggesting that the "surge" in household lending is in any way remotely indicative of consumer hope in a recovery is i) an idiot or ii) clueless and won't even be bothered to read the fine print which once again suggests that the only credit Americans will take on is whatever comes implicitly free, and is certainly not meant to be repaid, courtesy of Uncle Sam. Unlike credit cards.

This short commentary, with two excellent charts embedded, was posted on the Zero Hedge website on Monday afternoon EDT---and it's definitely worth reading.  I thank Casey Research's own Dennis Miller for sending it our way.

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Triple Whammy Shocker: Goldman Shutting Down Sigma X?

Back on March 21, before the release of Michael Lewis' Flash Boys and before the infamous 60 Minutes interview, when Goldman COO Gary Cohn wrote his infamous WSJ Op-ed bashing HFT, it was clear that something was afoot. That something became promptly clear when it was revealed that Goldman is among the core backers of the pseudo dark-pool IEX exchange popularized as the protagonist in Flash Boys, and juxtaposed to the front-running, and faceless, HFT antagonist that Lewis managed to demonize so well in the span of a few hundred pages, he promptly provoked a renewed investigation by the FBI, the SEC and DOJ into HFT.

A few days later, the shocker became a double whammy when Goldman announced that in addition to turning its back on HFT which had served it so well for years, the firm would also say goodbye to the NYSE and its designated market maker post, the last remaining legacy of its $6.5 billion Spear Ledds & Kellogg acquisition from 2000. That Goldman was asking mere pennies on the dollar for the residual assets also showed just how "highly" Goldman valued said legacy operation.

Moments ago we got the third and final "shocker" in this series of stunning disclosures by Goldman, this time involving Goldman's own "unlit" venue - one involving its own Dark Pool - the infamous, and market dominant Sigma X, which according to the WSJ, is about to be shut down!

This very interesting Zero Hedge article was posted on their website late on Tuesday evening EDT---and it's definitely worth reading.  I thank reader Bryan Cooke for digging it up for us.

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Florida’s orange production is declining

This year’s Florida orange crop is approaching the fruit’s lowest harvest in decades, and experts say a deadly bacteria that’s infecting the trees is to blame.

The U.S. Department of Agriculture on Wednesday released its citrus production forecast and the news isn’t good. The 2013-2014 orange forecast is 110 million boxes, down 4 percent from last month, and 18 percent less than last season’s final production figure.

Orange harvesting ends in June, and if the crop doesn’t decline further, it will barely exceed the 110.2 million orange boxes harvested in 1989-90 following the worst freeze in Florida citrus history.

Andrew Meadows, a spokesman for the Lakeland-based Florida Citrus Mutual, said that citrus greening disease is the reason for the crop decline.

This very interesting news item, filed from St. Petersburg in Florida, was posted on The Washington Post's website yesterday afternoon---and I thank West Virginia reader Elliot Simon for sharing it with us.

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Snowden: NSA lies about me not trying to spur internal investigation

The United States National Security Agency was well aware that Edward Snowden was troubled by the spy office’s activities, the intelligence contractor-turned-leaker tells Vanity Fair, and that evidence exists to confirm that claim.

Ahead of a 20,000-word article on the former NSA analyst expected to be published later this week, the US-based magazine has released excerpts from an interview with Snowden in which he specifically calls for the intelligence agency to come clean about allegations concerning any complaints he may have made before he began to leak classified documents to the press.

Snowden, 30, said last month in testimony delivered to the European Parliament that he spoke up to "more than 10 distinct officials” about his concerns regarding the NSA’s activities, but was eventually driven to leak documents about those programs due to the lack of response he received. He is currently in Russia after being granted asylum there, and is wanted in the US for disclosing classified documents.

This is the first of many stories from the Russia Today website---and the first of many stories that are courtesy of Roy Stephens.  This one was posted on their Internet site yesterday afternoon Moscow time.

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NSA monitors WiFi on US planes ‘in violation’ of privacy laws

Companies that provide WiFi on US domestic flights are handing over their data to the NSA, adapting their technology to allow security services new powers to spy on passengers. In doing so, they may be in violation of privacy laws.

In a letter leaked to Wired, Gogo, the leading provider of inflight WiFi in the US, admitted to violating the requirements of the Communications Assistance for Law Enforcement Act (CALEA). The act is part of a wiretapping law passed in 1994 that requires telecoms carriers to provide law enforcement with a backdoor in their systems to monitor telephone and broadband communications.

Gogo states in the letter to the Federal Communications Commission that it added new capabilities to its service that go beyond CALEA, at the behest of law enforcement agencies.

This incredible story showed up in my in-box long after I'd filed today's column, but Julie over at Casey Research was kind enough to add it to today's column---and I thank South African reader B.V. for finding it for us.  It's a must read.

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German Minister: 'U.S. Operating Without any Kind of Boundaries'

SPIEGEL: Minister de Maizière, nine weeks ago at the Munich Security Conference you demanded that the United States provide detailed information about its spying activities in Germany. Have you received anything from them yet?

De Maizière: The information we have received thus far is insufficient. That remains my opinion. The US' surveillance measures are largely a result of its security needs, but they are being implemented in an excessive, boundless fashion.

SPIEGEL: How did you come to this conclusion?

De Maizière: If even two-thirds of what Edward Snowden has presented or what has been presented with his name cited as the source is true, then I would conclude that the USA is operating without any kind of boundaries.

SPIEGEL: Are you hopeful that anything will change in the near future -- perhaps when Chancellor Angela Merkel visits President Barack Obama in May?

De Maizière: I have low expectations that further talks will prove to be successful. But of course these talks are continuing.

SPIEGEL: So you don't expect a no-spy agreement to result from these discussions?

De Maizière: Going by everything that I've heard, that's the case.

As I've been saying for years, dear reader---the U.S.A. has gone rogue.  This interview showed up on the German website spiegel.de at noon Europe time yesterday---and it's the second offering in a row from Roy Stephens.

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How Western Is Germany? Russia Crisis Spurs Identity Conflict

Many Germans feel a special bond to Russia. This makes the Ukraine crisis particularly dangerous for Berlin because it raises important questions about the very nature of German identity. Are we as deeply rooted in the West as most believe?

Right up to this day, Germans and Russians maintain a special relationship. There is no other country and no other people with which Germans' relations are as emotional and as contradictory. The connection reaches deep into German family history, shaped by two world wars and the 40-year existence of East Germany. German families still share stories of cruel, but also kindhearted and soulful Russians. We disdain the Russians' primitiveness, while treasuring their culture and the Russian soul.

Our relationship to the Russians is as ambivalent as our perception of their character. "When it comes to the relations between the Germans and Russians, there is a tug-of-war between profound affection and total aversion," says German novelist Ingo Schulze, author of the critically acclaimed "Simple Stories," a novel that deals with East German identity and German reunification. Russians are sometimes perceived as Ivan the Terrible, as foreign entities, as Asians. Russians scare us, but we also see them as hospitable people. They have an enormous territory, a deep soul and culture -- their country is the country of Tchaikovsky and Tolstoy.

This very interesting, but longish op-ed/essay is another contribution from Roy Stephens---and it's another posting from the spiegel.de Internet site---this one from early yesterday evening

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U.S. and E.U. prepare to strike Russian banks, energy firms

The U.S. and E.U. are preparing to strike at Russian banks, energy and minerals firms if Russia invades mainland Ukraine.

Speaking to U.S. senators in Washington on Tuesday (8 April) secretary of state John Kerry used blunt terms to describe events in Ukraine's Donetsk, Kharkiv and Luhansk regions in recent days.

“Everything that we’ve seen in the last 48 hours from Russian provocateurs and agents operating in eastern Ukraine tells us that they’ve been sent there determined to create chaos … These efforts are as ham-handed as they are transparent,” he said.

“No one should be fooled, and believe me, no one is fooled by what could potentially be a contrived pretext for military intervention just as we saw in Crimea.”

Trying to make mountains out of molehills.  There's no way on God's green earth that Russia will every move militarily against the Ukraine.  This news item, filed from Brussels, was posted on the euobserver.com Internet site yesterday morning Europe time---and I thank Roy Stephens for sending it.

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NATO commander says U.S. troops may be deployed to Europe over Ukrainian crisis

The United States Air Force commander in charge of the NATO alliance’s military presence in Europe said on Wednesday this week that U.S. troops may soon be deployed to the region as tensions continue to worsen near the border between Ukraine and Russia.

In an interview with the Associated Press, U.S. Air Force Gen. Philip Breedlove said that forthcoming plans intended to ensure stability in Europe for the NATO partners in the area could involve the mobilizing of American troops.

Representatives from the 28 countries involved in the multinational organization have asked Breedlove — a four-star general who has since last year served as the supreme allied commander of NATO’s European operations — to have a plan ready by early next week, according to the AP’s John-Thor Dahlburg, to reassure partners in the region “that other alliance countries have their back.”

This is insanity---and you can read all about it in this Russia Today news item that was posted on their website late Wednesday evening Moscow time.  It's also another offering from Roy Stephens.

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Kiev threatens force against eastern Ukraine protesters

Ukraine’s acting Interior Minister is threatening to resolve “in 48 hours” the situation in eastern regions where administrations of at least two cities are controlled by protesters demanding a nationwide referendum on the state structure.

Arsen Avakov told journalists on Wednesday that the coup-imposed government is ready to use force in the mutinous eastern regions.

"There are two solutions: a political one through negotiations or through force,” the minister said on the margins of a government meeting.

“For those who want dialogue, we propose talks and a political solution. For the minority who want conflict they will get a forceful answer from the Ukrainian authorities,” he said as quoted by Reuters, adding that in his opinion a “solution to the crisis could be found within 48 hours.”

A wonderful way to start a civil war, don't you think?  This news item showed up on the Russia Today website early yesterday afternoon Moscow time---and once again my thanks go out to Roy Stephens for sending it our way.

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Russia can’t support Ukrainian economy forever- Putin

Russia can’t continue to prop up Ukraine’s faltering economy, and this responsibility should fall on the US and EU, which have recognized the authorities in Kiev but not yet given one dollar to support the economy, President Putin has said.

“The situation is - to put it kindly, strange. It’s known our partners in Europe have recognized the legitimacy of the government in Kiev, yet have done nothing to support Ukraine – not even one dollar or one euro,” Putin said at a meeting with government officials at his residence outside of Moscow.

“The Russian Federation doesn’t recognize the legitimacy of the authorities in Kiev, but it keeps providing economic support and subsidizing the economy of Ukraine with hundreds of millions and billions of dollars. This situation can’t last indefinitely,” Putin said.

You couldn't make this stuff up, dear reader.  This must read story was posted on the Russia Today website early yesterday afternoon Moscow time---and once again I thank Roy S. for sharing it with us.

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Putin turns up economic heat before Ukraine talks

Russian President Vladimir Putin turned up the heat on Ukraine on Wednesday by threatening to demand advance payment for gas supplies, a move designed to exert economic pressure as Ukraine confronts possible bankruptcy, a mutiny by pro-Russian separatists in the east and a Russian military buildup across the border.

NATO's top commander in Europe warned that the alliance could respond to the Russian military threat against Ukraine by deploying U.S. troops to Eastern Europe, but Putin's latest tactics suggest he may be aiming to secure Russia's clout with its neighbor without invading.

Speaking at a Cabinet session, the Russian leader voiced hope that diplomatic efforts to ease the Ukrainian crisis would yield "positive results," an apparent reference to talks set for next week that will bring together the U.S., the European Union, Russia and Ukraine for the first time.

This AP story, filed from Moscow, was posted on the news.yahoo.com Internet site yesterday---and I thank Elliot Simon for his second offering in today's column.

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Ukraine’s Rust Belt Fears Ruin as Putin Threatens Imports

For Pavel Cesnek, the future of his sprawling locomotive maker in eastern Ukraine lies in the balance and its fate will be sealed across the Russian border.

The head of Luganskteplovoz in the city of Luhansk rules over a communist-era factory and workforce of 6,500 that builds trains primarily for state-run OAO Russian Railways. Like many local businessmen, he fears the pro-European government in Kiev will antagonize the Kremlin into unleashing trade restrictions that could wipe out industry across Ukraine’s rust belt.

“Trade ties with Russia are an existential question -- to be or not to be,” said the 40-year-old Czech. “Without Russia, there’d be a total collapse for me, my workers and my owner.”

This very interesting news item was posted on the Bloomberg website yesterday afternoon Denver time---and once again my thanks go out to Roy Stephens.

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De-invest from the West: Russia urges companies to return assets to the motherland

As the US and Europe escalate talks of sanctions, Russia is recommending companies unregister abroad and bring their shares to the Moscow Exchange to protect from possible future sanctions and provide economic security.

“Companies that have listed shares on the New York Stock Exchange, London need to seriously reconsider,” Russia’s Deputy Prime Minister Igor Shuvalov told reporters in Moscow on Tuesday.

Sanctions by the West have ramped up over the geopolitical action in Ukraine, and Russian business and politicians have been the target of asset freezes and visa bans.

The government will not force companies to delist and return to Russia, but Shuvalov said the Russian state and the Moscow Exchange will work together to create “attractive conditions” for companies to make the switch.

This is another Russia Today news item.  This one showed up on their Internet site during the Moscow lunch hour yesterday---and its the second last offering of the day from Roy.

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Spanish parliament rejects Catalan independence bid

Spain’s parliament on Tuesday (8 April) overwhelmingly rejected Catalonia’s bid to call for a referendum on independence.

There were 299 votes against a proposal by Catalan leader Artur Mas to have an independence poll. Only 47 MPs from the Catalan and Basque nationalist parties voted in favour of the petition. One MP abstained.

Centre-right Prime Minister Mariano Rajoy told the deputies before the vote that he could not “conceive of Spain without Catalonia nor of Catalonia outside of Spain and Europe.”

This story, filed from Brussels, was posted on the euobserver.com Internet site yesterday morning Europe time---and it's the final offering of the day from Roy Stephens.

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Three King World News Blogs

1. Gerald Celente: "This Disastrous Event is Going to Shock the World"  2. Rick Rule: "Silver---and a Golden Opportunity For Investors"  3. David P.: "Shocking Charts Show Silver Set For a Staggering $70 Surge"

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]

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Perth Mint: Monthly Sales for March 2014

According to Bron Suchecki over at The Perth Mint: "The chart below shows our sales of minted bars and coins, with gold down and silver up on last month. However, minted products are only about 10% by volume, with our cast bar sales usually over 600,000 oz/ a month, mostly in the form kilobars into China – premiums have come off and back to normal. Perth Mint Depository is stable with a lot of buying and selling by clients."

This tiny blog, with an excellent chart, is worth a few seconds of your time---and I thank Bron for sending it our way.

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Platinum prices stagnant given supply - for now

Michael Kavanagh, Noah Capital Markets metals and mining analyst, told Mineweb that if the platinum price hasn't moved, then it means there is no shortage in supply. “It looks like the buyers of the product in the open market have all the platinum they need," Kavanagh said. "And at the end of the day, the price goes up if there is a need of metals. So clearly there is no fear that they (markets) will not get it in the near future."

Ryan Seaborne, an equity analyst at 36one Asset Management, said out of the three major producers of platinum, Anglo American Platinum had the most on ground stock, while Lonmin stock was nearly depleted and Impala Platinum's was nearing its end. Amplats stock can last towards the middle of the year, Seaborne estimated. On price, he said it was stagnant - so far- because there had been no supply response. But if the unions held out the platinum price could go higher. He also claimed all three companies made a gentleman’s agreement to help each other in meeting contractual obligations. “Amplats will most likely assist with helping the others reach their (contractual) obligations and if the strike ends soon there is no risk to supply,” he said.

What no serious precious metal analysts knows, or will admit to if they do, is that 3 or 4 U.S. bullion banks, probably led by JPMorgan, hold a 19% short-side corner in the Comex platinum market, along with a 23% short-side corner in the palladium market---according to last week's Bank Participation Report.  In such tiny and illiquid markets, the price will go nowhere if the dominant players won't allow them to.  This tiny article, filed from Johannesburg, was posted on the mineweb.com Internet site yesterday.

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Jay Taylor: Prepare for bull market to shock even most ardent goldbugs

This interview with Jay by The Gold Report showed up on the mineweb.com Internet site earlier this morning British Summer Time---and it's a must read.  I've known Jay for about ten years---and with the possible exception of Leonard Melman---a nicer man you could never hope to meet.

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